Sky has a bit of a problem. After several years of impressive growth, the number of new subscribers to its satellite TV service has started to slow down. There are a number of reasons for this, but the one most frequently trotted out is the success of the digital terrestrial Freeview service.
For a one-off payment of around £75 for a decoder, Freeview offers existing free-to-air channels such as BBC1, BBC2 and Channel Four, plus a few bonus stations. There cannot be too many people left in the UK who are happy to place a dish on their house and fork out for a subscription to BSkyB.
Sky's boss, James Murdoch - yes, you have guessed the name of his father - is painfully aware of the dilemma, and this week took steps to ensure the growth continued.
The City got most excited about the announcement of a free-to-air digital satellite package. Customers will pay £150 for the satellite system and installation, and will then be able to view 200 channels. At face value it looks like a great deal, but many of those channels will be shopping services, travel stations and "plus one" versions of existing channels that show what the original channel screened an hour ago.
While there is still a niche group of customers who cannot actually receive digital terrestrial signals and so may be tempted by Sky's offer, it hardly seems likely to strike a chord with middle England digital refuseniks. Chances are, when they are eventually forced to upgrade to digital TV - the government is discussing switching the analogue transmitters off in 2010 - they are more likely to take the Freeview route through the service's association with the BBC than make the switch to satellite.
Of course users who do opt for Sky's free-to-air package must do so in the knowledge that once they have taken delivery of the system, it certainly will not be the last they hear from the company. With the equipment installed in their home - and let's not forget, subsidised by the broadcaster - the penance for customers is likely to be endless attempts to persuade them to upgrade to a full subscription service and to opt for pay-per-view events.
Personally, I think the free-to-air offer overshadowed what will be seen as the most significant announcement Sky has made in years - of the plans to launch a high definition TV service.
While Americans have enjoyed high definition TV for years, Europeans have been left out in the cold. Endless wrangling among the continent's broadcasters, to say nothing of the fact that Europe has several incompatible TV broadcast standards, has lead to something of a stalemate.
Details about Sky's proposed service are sketchy, yet at last it does seem to be forcing the issue.
How much demand there is for high definition TV in the UK is a moot point, but with the gradual shift in living rooms from standard CRTs to LCD and plasma screens, the demand for high definition services seems sure to grow.
The move, which has the hallmarks of a man apparently highly keen on new technology, shows that Sky is also focusing on upping the average revenue it receives from each of its core users. High definition channels are probably only the first of many new announcements from the company that are designed to ensure it keeps those crucial viewers who are prepared to pay a premium to be the first users of a new service. Sky is starting to face competition for its Sky+ hard disk based video recoding service, which has been a huge cash cow for the company. This comes from hard disk recorders that work with digital terrestrial services and offer a similar type of advanced on-screen programming guide that Sky viewers have had for years. An even more potent threat may come from PC manufacturers looking to displace digital TV decoders, recorders, DVD players with an entertainment computer that replicates all their functions.
It is still early days for the entertainment PC, but models that offer a huge range of features, including a unique selling point over Sky in accessing video and audio content from the web, are now reaching the stores in living-room friendly forms.
Sky also faces competition from cable companies Telewest and NTL, who could offer many innovative web-based services through the TV.
Sky intends to stop its high-spending early adopters from shifting to entertainment PCs and cable by also offering the type of service the PCs can boast.
So later this year, for example, we will see Sky enabling users to program the Sky+ box via the internet or a text message. Upcoming Sky+ boxes will also offer much larger hard drives - 240 gigabytes has been rumoured - and may even feature integrated DVD recorders to enable users to instantly and permanently archive their video recordings.
Most of all, Sky almost certainly has devices up its sleeve that connect to the internet via broadband to deliver video on demand and music downloads - something it cannot really successfully offer via digital satellite. Given its experience in producing user-friendly interfaces and its obvious links with the entertainment industry, a Sky service could achieve for video downloads what iTunes has for audio downloads in the US.
There are those in the industry who believe Sky still holds all the aces.
Brian Sugar, vice-president of marketing for 2Wire - which manufactures a set top box that pulls in content from both satellite TV and the internet - feels that, especially in the UK, the set top box will triumph over the PC.
"Ultimately it is all about watching TV. About 90% of what you use the screen for is watching TV, not streaming video or going online. Whoever controls the TV content like News Corp [Sky's parent company] in the UK will have massive say over what type of box is underneath the TV," he said.
"Besides, the kind of people who may think about spending £1500 on a high-end entertainment style PC probably already have Sky and won't want to ditch it in favour of say a PC with just a Freeview digital decoder."
But with huge corporations like Microsoft and Intel sensing that the entertainment PC could prove to be another great way to encourage users to upgrade their hardware, Sky is certain to face some stiff competition.
